National Association of Home Builders Discusses Economics and Housing Policy

First Quarter GDP Growth – Second Estimate: Not All Bad

The Bureau of Economic Analysis (BEA) released the second estimate of real GDP growth for the first quarter of 2012. The second estimate shows real GDP grew at a seasonally adjusted annual rate of 1.9 percent, down from the advance estimate of 2.2 percent. Growth in the fourth quarter of 2011 was 3.0 percent.

The modest downward revision was based mainly on less inventory investment, boding well for future growth, less government spending, and slower, but still healthy growth in personal consumption expenditures (PCE), 2.7 percent instead of the initial 2.9 percent estimate. PCE growth was 2.1 percent last quarter.

These downward revisions were partially offset by upward revisions to fixed investment, resulting in an upward revision to growth in final sales of domestic product to 1.7 percent from the initial estimate of 1.6 percent. Increased business spending on fixed investment rather than inventory investment represents a positive signal for momentum in growth going forward.